We
understand that Revenue was boosted by higher cement prices across certain
regions and translation gains from stronger currencies. However, volumes
remained under pressure, mainly due to weak output from Ethiopia (sustained
civil unrest), Tanzania (shut down operations from Feb-May for maintenance and
due to high costs) and Ghana (operations halted pending the completion of
Dangote jetty).

We
understand however, that operations are back up in Ethiopia amid relative
stability and expect Tanzanian operations to pick up following the delivery of
gas gensets (expected in August). Exports to Ghana are however expected to
resume anytime from Q4’18 when sea-based exports would be operational. Overall,
Group revenue rose 17% y/y to ₦482 billion (Vetiva: ₦481 billion), supported by a 7% y/y rise in volumes to 12.36 million MT
(Vetiva: 12.61 million MT).

Positive outlook maintained despite mild miss in H1

Following
better than expected volume roll out in H1’18, we revise our Nigeria volumes
estimate to 15.4 million MT (Previous: 15.3 million MT) for the year. With
management hinting at no plans to change prices any time soon, we estimate an
FY’18 Revenue of ₦685
billion (Previous: ₦681
billion). Meanwhile, we note the sustained downtime across certain Pan African
operations and thus, revise our FY’18 volume expectation to 10.8 million MT
from 11.2 million MT.

However,
after adjusting for the impact of FX movements, we reduce revenue mildly to ₦273 billion (Previous: ₦279 billion). Overall,
we cut our volume forecast for the Group to 26.2 million MT (Previous: 26.5
million MT) and our FY’18 revenue estimate to ₦958 billion (Previous: ₦960 billion). We also adjusted our FY’18 cost
estimates to reflect H1’18 run rate.

Following
this, we arrive at a reduced FY’18 Group EBITDA of ₦490 billion (Previous: ₦499 billion). Furthermore, we raised our interest
expense from ₦27 billion to ₦39 billion, after taking
into account the FX losses in Q2 and the recently issued Commercial papers
(Series 1: ₦12.04 billion at 12.40%
PA, Series 2: ₦37.96 billion at 12.65%
PA).

We
understand that the proceeds from the notes would be used to fund some local
projects and improve working capital. After adjusting for tax, we revise our
PAT to ₦243 billion. With a
revised target price of ₦276.28 on the stock, we maintain our BUY rating.